The outgoing Conservative government’s record on tech was, surprisingly, somewhat anti-tech. The Online Safety Bill threatened encryption. The Digital Markets, Competition and Consumers Bill allowed regulators to block acquisitions approved in the US and EU.

Tech leaders were aghast. “People are shocked, people are disappointed, and people’s confidence in technology in the UK has been severely shaken,” Microsoft President Brad Smith complained after receiving a negative decision on his company’s proposed takeover of game maker Activision. The UK risked becoming a “Death Valley” for tech, warned Activision CEO Bobby Kotick. After both the EU and US approved the deal, the UK authorities made an embarrassing volte-face.

Labor leader Keir Starmer ran a campaign that was a referendum on Tory rule and has been tight-lipped on tech policy. Dramatic rhetoric vanished about turning the UK into the “next Silicon Valley.” Digital policy proposals based on Labour’s Manifesto are limited — and often contradictory.

• Digitize Government: Labour faces historic debt and will strain to fund an expansive spending program (the debt to GDP ratio has been hovering at around 100% since 2020). With the idea of doing more with less, Labour wants to encourage the deployment of cutting-edge technology to improve the efficiency and capabilities of public services.

• Support AI Industry and Data Centers: The Labour manifesto aims to “ensure our industrial strategy supports the development of the Artificial Intelligence sector” and “removes planning barriers to new data centers.”

• Impose Strict AI Regulation: While encouraging AI deployment, Labour promises “binding regulation on the handful of companies developing the most powerful AI models.” Unlike the light-touch approach of the previous Conservative government, Labour could stifle the transformative technology’s rollout.

Although Labour’s Industrial Strategy Paper says a lot of the right things, like increasing access to start-up finance and access to talent, and promoting stable trading relationships, it aims to balance “the burden between our high streets and the biggest online and digital firms.” This could mean more taxes for online stores if digital tax negotiations at the OECD stall.

Watch out for the new government’s prominent “Industrial Strategy Council.” The full-time expert body will have a legal mandate to work with the government to achieve industrial policy goals. An encouraging sign would be if Labour included significant technology companies on its advisory board.

Some hopeful glimmers are visible in the new government’s early days. The Department for Science, Innovation and Technology, is led by new secretary of state Peter Kyle. He envisages the department as “a new digital centre for government”, with a mission to deliver economic growth and improve the efficiency of UK public services. It’s a good idea to make government services “personalized, convenient, and timesaving” and to have the government lead by example.

The UK still enjoys outsized influence in the global start-up world. London remains home to the most startups and VC firms of any European city. The new Labour government is eager to harness that advantage. But it faces limitations given the UK’s size. Post-Brexit, the UK sits in a much smaller market than the EU, and the US, let alone China. Even if Labour forges tech policy leadership, economic constraints will limit its influence.

The new government will have to decide whether it wants to align rules with continent-wide markets, or tailor rules to local needs, with the risk that market players will decide those changes are too expensive.

This means Labour may find itself aligning more with the EU than demanding its own gold-plated exceptions. The UK quest to offer the world an acceptable “third way” will ultimately depend on the attractiveness of its digital regulations.

Kayvan Hazemi-Jebelli (Kay) is Senior Director for Europe at the Chamber of Progress, a technology industry association based in the US. Kay has over 14 years’ experience in digital policy and European law, as counsel to a European industry association, in private practice, in the European Commission Directorate-General for Competition, in academia, and at a leading UK media and communications company.

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

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